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US EQUITY OPEN: Stocks lower at the open as chip and memory names tumble on calls to slowdown AI development

This is a composite session recap, so the read is about how the pieces fit together rather than any single catalyst.

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US EQUITY OPEN: Stocks lower at the open as chip and memory names tumble on calls to slowdown AI development

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OPEN: Stocks opened in the red on Monday, with clear underperformance in the Nasdaq as AI-linked names tumble following a collection of calls from AI CEOs, including Anthropic and OpenAI, for a slowdown in the pace of AI development amid concerns over the risks associated with increasingly advanced AI. The developments have sparked notable weakness in semiconductor and memory names, which have been major beneficiaries of the significant demand for computing infrastructure required to sustain the AI buildout, with a potential slowdown in development raising concerns over future demand. In turn, some hyperscalers, including Meta (META) and Google (GOOGL), are outperforming, potentially reflecting expectations that a slower AI buildout could reduce future CapEx requirements. Software names are also outperforming as concerns that increasingly advanced AI could replace existing software services ease. Sectors are mixed, with Communication Services, Consumer Staples and Health Care outperforming, while Technology, Industrials and Materials lag.

Treasury yields are higher across the curve on Monday, with the curve flattening as expectations for a Fed rate hike at Wednesday's FOMC meeting continue to build following Friday's hotter-than-expected CPI report. An updated Reuters poll found 85% of forecasters now expect a hike this week, versus the prior poll which showed a consensus for rates to remain unchanged. The AI developments could also have implications for Treasuries: if the pace of AI development slows materially, corporates may ultimately require less debt financing to fund the enormous infrastructure buildout. Elevated corporate issuance has been one factor contributing to the backup in yields this year, so a reduction in expected AI-related borrowing could potentially provide some support to Treasuries, particularly further out the curve.

Energy prices are firmer after Gulf states called off a planned meeting with Iran on Monday, with Saudi Arabia reportedly pulling out amid the situation in Yemen. Meanwhile, the Houthis launched a fresh attack on Saudi Arabia, while AP reported that the crucial East-West pipeline is expected to remain largely out of service for several weeks while repairs are carried out.

In FX, the Dollar is rallying amid the risk-off environment and firmer US yields, while the Yen, Antipodeans and Euro lag, and gold tumbles below USD 4,300/oz.

STOCK SPECIFICS

  • AI-linked stocks: Under pressure after bosses of AI companies called for a slowdown in the pace of AI development
  • Oracle (ORCL): Executive Chair Larry Ellison cancelled his plan to sell USD 7.5bln of Oracle shares
  • The Baldwin Insurance Group (BWIN): Going private in a USD 7.7bln deal with Sequence Holdings and Michael Dell's family office
  • The Elmet Group (ELMT): Gets USD 450mln DoW investment and up to USD 2bln Defense Logistics Agency contract
  • Affirm Holdings (AFRM): Upgraded at Wolfe Research
Context

Self-imposed calls from AI lab chiefs to slow development are a novel variant on a familiar pattern: selloffs sparked by the industry's own insiders have historically cut deeper into the enablers (semis, memory, infrastructure) than into the deployers, which is exactly the split here, with hyperscalers outperforming on lower implied CapEx and software rallying as the displacement narrative fades. That intramarket rotation, rather than outright index direction, is the tell that this is a demand-visibility repricing rather than broad risk aversion, though the FX tape (dollar bid, yen and antipodeans offered) shows the risk-off overlay is real. The rates leg is the more durable story: a hot inflation print flipping the forecaster consensus toward a hike within days is the kind of rapid repricing that has tended to flatten curves and pressure long-duration equity multiples simultaneously, and the note's point that slower AI buildout would mean less corporate issuance is a genuine cross-asset channel worth tracking in the primary market rather than in commentary. CEO letters calling for pauses have in past episodes produced sharp one or two session moves in the AI complex that faded absent any regulatory follow-through, so the distinction to draw is between rhetoric and anything binding from Washington or Brussels. The follow-ons are the FOMC decision itself, whether megacap CapEx guidance shifts at the next earnings round, and whether the safety calls acquire institutional sponsorship. The Ellison cancellation of a large planned share sale is a notable insider signal in the same AI-complex tape.

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